UPDATE 1-Bank of England acts to keep banks lending through 2021

(Adds detail)

By David Milliken and Huw Jones

LONDON, Dec 11 (Reuters) - The Bank of England took steps on
Friday to keep banks lending through 2021 as Britain deals with
the COVID pandemic and a big change in its trading relationship
with the European Union.

The central bank said the counter-cyclical capital buffer -
extra money banks must set aside during economic good times -
would be held at zero until at least the last quarter of 2021.

Banks would not need to implement any future change until
the end of 2022.

"Some headwinds to banks' capital ratios are ... anticipated
over coming quarters as unemployment rises, business
insolvencies rise from current low levels, and risk weights on
banks' exposures increase," the BoE said in a half-yearly
assessment of the health of the financial system.

"Nevertheless, the major UK banks can absorb credit losses
in the order of 200 billion pounds, much more than would be
implied if the economy followed a path consistent with the
Monetary Policy Committee's central forecast," it added.

The BoE also reiterated that it did not plan to relax
financial standards after a post-Brexit transition period ends
on Jan. 1.

"Irrespective of the particular form of the UK's future
relationship with the EU ... the Financial Policy Committee
remains committed to the implementation of robust prudential
standards in the UK," it said.
(Writing by David Milliken, editing by Andy Bruce)